When people are going through their records at year-end for their tax returns or closing their books they typically have two questions: What do I need to keep? And how long should I keep it?

As you are evaluating your new year’s resolutions, your record retention policy should be a part of that list. Whether you’re adding, developing or updating your policy, this resolution is beneficial for individuals and businesses.

However, these questions can be more difficult for businesses to answer because businesses have more standards they are being held to.  And many industries, such as insurance and health care, have set their own document retention standards.  As a result, businesses need to check with their regulatory authorities or professional associations to ensure that they conform to their standards.

At the below link, you will find a printable PDF that offers a quick and concise list of general guidelines that we would recommend for record retention. Of course, these should be modified based on any potential litigation, industry standards or any other guidelines specific to your situation.

2014 Record Retention Guidelines

Other Considerations

More questions arise after you determine how long and which records to keep. Where and how should you store the information is a huge concern. There are many different choices for storage, and the cost and security can vary drastically with each.  A few different options are:

  • Paper file storage
  • Electronic media
  • Cloud
  • Servers

A few important considerations that should be evaluated when considering storage options are an organization, ease of access, security, and cost. If you need to access these files in the future for situations such as an IRS audit or a legal proceeding, the records should be fairly easy to access and you should have them organized in a manner that you can locate specific items.  Additionally, you should consider the security of the data from fires, floods and theft.

After considering all of the items above, businesses should begin to write their record retention policy. The policy does not have to be long.  It can be short and to the point. The policy should be easy to follow, monitored and enforced consistently.  Below are a few key considerations that should be included:

  • Define how long, and where the records should be stored. The policy may be different for paper and electronic records, and you may want to consider scanning the paper records and disposing of/shredding the hard copies.
  • Double check that you have included all types of records in your policies such as emails, voicemails, digital printers, etc.
  • Specify how records will be destroyed once their retention period has expired. Would the method be automated for electronic data? How will the paper files with confidential information be disposed of?
  • Document who has the responsibility for enforcing and monitoring the policy.
  • Detail circumstances when the policy should be suspended or updated.  This would include situations of an audit, lawsuit, or if the technology being used changes.
  • Consider engaging your legal counsel to review your record retention policy.

If you have additional questions or would like assistance in creating a record retention policy, please contact us.

About the Authors

Cindy H. Mitchell

CPA
Senior Manager, Taxation Services

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